Neil Jenman’s theories on real estate

[stevie_sloth]

I bought this book second hand a few years ago, when we were interested in buying a property, and it’s called something like 10 Mistakes in Real Estate and how to avoid them or something, and it’s by Neil Jenman.

Anyway, I dug this out and have been re-reading it cause now we want to sell, so it’s a whole different perspective.

Basically, some points I find interesting are…

1. Auctions SUCK for everyone. Agents use ‘em just to get properties sold quickly, but don’t care about getting the best price. Sellers use ‘em cause agents tell them they’re the best way to maybe get the best price, and buyers hate ‘em for obvious reasons.
2. Agents “condition” sellers to reduce their prices. They inflate the initial price valuation so the sellers will list with them and then once they do, they gauge “market interest” from potential buyers and then tell the seller it doesn’t look as good as expected, so best lower the price to get more interest.
3. If any offers are received from buyers to an agent, the agent might tell the seller it’s lower than it actually is so the seller will lower their price. (this is before auction)
4. Often auctions will yield a lower price than offers received prior, but agents want the auction to go ahead in case it might get a better price.
5. Auctions are the worst way to get the best possible price cause if one buyer’s max budget is $500,000 and another’s is $550,000, once buyer 1 stops bidding at $500,000, buyer 2 will go to say, $510,000 and then it’ll be sold. But buyer 2 would’ve paid $550,000. So that $40,000 was lost.

There’s much more but I can’t remember it all now. Lol.

Has anyone else read this or is familiar with this sort of thing? Is it true? To me it seems to be, but who knows. Lol.

 

[wylie]

Here we go again...... I can feel some agent bashing coming on .

Like all jobs and professions, there are good and bad agents. In my experience, most are pretty good.

Like all things, you need to know what you want, do your own homework, decide whether you want to sell via auction or list at a price and be prepared to have low offers come in.

Unless you are desperate to sell, you are in control. The agent will not force you to sign anything.

These things you list from the book just make me smile. I don't like the method that the author uses for selling, so it comes down to what you are happy with, finding an agent you trust and feel comfortable with and go in with your eyes and mind open, and don't sign anything that you are not happy with.

 

[stevie_sloth]

Well, I’m not bashing ALL agents. I’m not even bashing any technically, I was just interested and am wary of the “sharks” out there, you know? Of course they’re just trying to do their jobs, and no sales = no job or money for them, so…yeah. It’s understandable. The book DID say many times that getting a GOOD agent who is a GOOD negotiator is vital…so there are SOME good agents. Lol.

We would definitely not sell by auction. Auctions around here just don’t ever go well. They all start really low and then hardly anyone bids so the properties are passed in, and then sell later for much less than what they originally wanted. OR they sell for what appears to be an astronomically high amount, BUT really it’s probably still below the seller’s ideal price because the agents have put the properties in too low price brackets so the buyers who come think they can afford the properties (say from $300-$400k), when the seller’s reserve is $600k…and then it starts at $540k and the buyers are like WTF!? Then it goes to $570k and the buyers are annoyed it went to “high” but the sellers are disappointed…

You don’t like the method the writer uses for selling? Is that the name your price and then just wait for someone to pay it, and if no one does, gradually lower the price till someone pays? No auctions, no “price on application”, etc.

Do you prefer auctions? Why? (not being weird or accusatory here. Lol. Just curious) Cause to me, even if some auctions DO go well (in terms of many active and in-love-with-the-property bidders and prices driven up cause of that), isn’t it still the case that the HIGHEST price of some bidders won’t be reached cause they simply don’t have to pay it? Whoever has the second highest maximum price reaches it, then the highest max price bidder just goes the minimum over…and it’s sold. The seller IS happy cause it’s passed their reserve, but this is their LOWEST price. The winning bidder would have paid higher but didn’t have to. You know? Isn’t that a waste?

Also, another point which I think I agree with is that open house inspections aren’t ideal. It leaves you open to thieves and also there are many people (hopefully!) in your property and it could make it seem smaller and more crowded…also, the inspections are only at set times and people must be free on those times, or have to fit in 3 inspections all at the same time in different areas, etc.

I guess if you have open homes AND private inspections also to suit individual buyers, that’s ok.

But how DO you find an agent you’re comfortable with?? How do you KNOW they’re the good ones?

 

[jrc]

I have read Jenman's book a couple of times. I thought he made some valid points about auctions.

 

[evand]

You say it liked its undeserved.

Here we go again...... I can feel some agent bashing coming on .

There are no good and bad agents. They are all the same, its the way the RE system works, sanctioned and trained by the Real Estate Institutes of each state and nationally (and run by ex agents ) That is the problem.

 

[stevie_sloth]

Heheh. Although I thought many of the things he said were good and true, I DID tend to feel I was sitting in one of those “brainwashing” seminars. The ones you pay thousands for.

And yes, the Real Estate Institute seems to be bad…but I still think there are better agents. Not meaning they CARE about the seller…I mean, hello, they don’t know the seller personally (usually), they’re simply doing a job. It’s the good ones that do the job the most ethical and honest way BUT at the same time while still being able to operate and negotiate well enough so as to achieve the highest price AND the quickest sale if required.

Something else I learned which I wasn’t 100% sure about before is to NEVER pay anything upfront to agents. Is this true? NEVER? Not even for newspaper ads?

 

[Ausprop]

Do you prefer auctions? Why? (not being weird or accusatory here. Lol. Just curious) Cause to me, even if some auctions DO go well (in terms of many active and in-love-with-the-property bidders and prices driven up cause of that), isn’t it still the case that the HIGHEST price of some bidders won’t be reached cause they simply don’t have to pay it? Whoever has the second highest maximum price reaches it, then the highest max price bidder just goes the minimum over…and it’s sold. The seller IS happy cause it’s passed their reserve, but this is their LOWEST price. The winning bidder would have paid higher but didn’t have to. You know? Isn’t that a waste?

the assumption here that is possibly in error is that the agent can extract the higher price that the bidder was willing to pay. no one would start out with a high offer anyway and if the vendor is wiling to take the lower offer it may sell at the lower offer price by private treaty regardless. At auction, 2 noddy bidders may push each other higher than otherwise may have happened.

I dont like auctions tho - I think it creates too much pressure and removes the ability of the buyer to negotiate clauses that may be of value to them but not to the seller

 

[stevie_sloth]

Yeah, I agree.

And yeah, of course if the seller is happy with a price, even a lower one, they will be happy and good on ‘em. But I’m just saying that I think there’s a higher probability of private sales (non-auctions) obtaining the buyer’s highest price. IF the seller wants to wait longer (maybe) to get it and wouldn’t be as happy with a lower price, and IF the agent is good.

 

[wylie]

There are good agents out there. Go to lots of open houses and get a feel for what they are like. I know agents I would not use, and agents I am happy to use, who negotiate well and don't try to push us to accept "any offer".

I am lucky that I know lots of agents, and have been well looked after by several.

For me, to sell, I would get a few agents in to get a feel for where my house is sitting. I would put an asking price on it, and see what the market says. Those who say agents will "crunch" you, well if you have had 20 inspections, some of which are second inspections, and still no offers, then that is the market telling you the price could be too high. You probably don't need the agent to tell you.

For our recent sale, we didn't pay for any newspaper adverts. We were prepared to put one advert in the local paper, but it wasn't necessary.

 

[stevie_sloth]

Yeah, that was in the book too, although perhaps things are different as this book was from 1998. Not much internet back then compared to now.

But yeah, the most likely buyers are in the local area, or at least looking there.

 

[Paul Do]

Every real estate agency group has their own sales system. The Jenman system is one. Neil has sold it, but when he developed and owned it he tried to make it as ethical as possible and it was/(is?) one of the system's tag lines.

If you understand the details of the various systems, you will be better positioned to buyer better.

 

[lizzie]

auctions have their place and time ... however, this place and time is a very short period of each property cycle.

in a sharply rising, frenetic buying market an auction sale (as the vendor - not as a buyer) can be your friend.

at all other times, private sale is the best method.

 

[Luv2Travel]

1. Auctions SUCK for everyone.

Tell that to the vendor who sells for $300K over the reserve.

2. Agents “condition” sellers to reduce their prices.

All of which can be avoided if the vendor does a little bit of homework themselves and gets some idea of what their property is worth. I would never hand over anything of mine of value such as my car, a painting, a house etc. to a 'professional' and rely solely on what they tell me the worth is. Especially with internet, there is no excuse for not having some idea yourself.

The agents are evil topic has been done to death. I am with Wylie, as with every profession there are good and bad. And I suspect it's the lazy vendor who suffer the bad and then complain about the industry.

 

[Mike88]

Firstly, I do not like the way Neil Jenman operates but unfortunately he is correct regarding points 2, 3 & 4.

2. Agents “condition” sellers to reduce their prices. They inflate the initial price valuation so the sellers will list with them and then once they do, they gauge “market interest” from potential buyers and then tell the seller it doesn’t look as good as expected, so best lower the price to get more interest.

This is often the case because owners are completely unrealistic when it comes to pricing their own home. Many agents are happy to take on overpriced listings & then either try 'condition' the owner or at least appear to be busy by having a lot of stock on the market.

The way we operate is to justify our price with a range of information in such a way that hopefully the owner will see we are trying to provide them with an honest opinion of value. I believe that if you do not agree on pricing then the chances are you will either not sell (& therefore not get paid) or the owner will be disapointed with the final result & will not refer any future business your way.

3. If any offers are received from buyers to an agent, the agent might tell the seller it’s lower than it actually is so the seller will lower their price. (this is before auction)

Yep I've heard of this happening, very dodgy.

4. Often auctions will yield a lower price than offers received prior, but agents want the auction to go ahead in case it might get a better price.

This is correct but I am not sure how it can be blamed on the agent. We often recommend owners take an offer prior to auction (& infact sell a large percentage this way).

There can be so many different factors which affect this but again it often comes back to an owner being unrealistic, not listening to market feedback, ignoring their agents advice or just being plain greedy.

If the agent & the owner agree upon the correct price for their home & the owner trusts their agents opinion then when they recieve a great offer they should listen to their advice, which is often, take it!


Michael

 

[Steve Fitz]

If you set a reserve that you're happy with then theres no reason why you should leave your auction dissatisfied.

I think some of the examples you cite are stupid. I could easily raise an hypothetical counter arguement that makes his suggestion redundant.

 

[Ausprop]

I think some of the examples you cite are stupid.

tell it how it is!

 

[Dazz]

I very much liked Jenman's analogy of a selling agent employing his tactic of starting at the top of a mountain, and slowly walking through and down the price mountain until he finally comes to his highest offer.

This is the exact opposite of a standard auction, where you start off low and go higher. It makes good sense to me when you are wearing a Seller's hat to start high and come down ever so slowly.


In terms of standard auctions, I am a firm believer in the price obtained always being a smidge more than what the 2nd highest bidder will pay. Back in '02, I bid on a house at auction - the only time I've ever done so. My unconditional limit was 664.5K. My parents were with me, and during bidding, offered me another 50K if I really wanted it. That made it potentially 714.5K.


The bidding started at 600 and quickly went to 660 in 10K increments. By then, there was only two of us left....me and a Singaporean fellow over the other side of the crowd. Over the next 18 minutes and over 100 further bids, with the auctioneer taking a few breaks in between for a sip of water, we both slowly crept up in $ 500 increments until finally I bid my extended top price. He kept going to 715K and I was forced to pull out and that is what the house was knocked down at.


Before he went inside to sign the paperwork, I went over and shook his hand and congratulated him. Before the agent got to him, I said that I had reached my financial limit and quietly enquired of him was he close to his. He said he was prepared to go to 735K and was stoked to get it "20K cheaper than expected".


After that, it convinced me never to sell at auction.

 

[Chui]

In theory, a Dutch auction (for sale by tender) fetches the optimal price because the buyers only get one shot.

 

[Steve Fitz]

Before the agent got to him, I said that I had reached my financial limit and quietly enquired of him was he close to his. He said he was prepared to go to 735K and was stoked to get it "20K cheaper than expected".

After that, it convinced me never to sell at auction.

I bought a listed home for $207k a few years ago, which was their asking price. It presented well and to me was good value. In fact, if they had of been asking for $220,000 i probably would have paid that amount as it was still a bit lower than what the area was generally.

Perhaps given your experience with auctions, and mine with listings, we should NEVER SELL due to fear of not getting the best price.

 

[tom32]

One thing that has always puzzled me is why people would sell a house at Auction in either of Perth or Brisbane.

When you look at the clearance rates even in good times, to me it would seem to be a daft idea and one that is surely 4 out of 5 times just going to lead to expenses and no result.